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Banks on both sides of the Atlantic are assessing their exposure to individuals and entities named in a new trove of confidential records known as the “Troika Laundromat,” using procedures they honed in response to prior large-scale revelations of illicit finance.

From 2006 to 2013, Troika Dialog, the Moscow-based private investment bank at the heart of the scheme, created 75 offshore firms to help Russian oligarchs, officials and crime syndicates funnel $4.6 billion out of Russia, according to the results of an investigation by the Organized Crime and Corruption Reporting Project, or OCCRP, and Lithuanian news site 15min.lt.

Funds from the scheme allegedly flowed through Germany’s Deutsche Bank, Austria’s Raiffeisen Bank, U.S. lender Citigroup, the three largest lenders in the Netherlands, several Nordic banks and the Swiss affiliate of France’s Credit Agricole.

The latest disclosure comes as separate regulatory and criminal investigations into large-scale money-laundering operations involving several banks in Europe, including Danish lender Danske Bank and its affiliate in Estonia, continue to rattle shareholders and fuel divestment.

“It has certainly caught the attention of senior management … but we’re not going to set up a separate investigation for each incident,” a compliance officer with a European bank told ACAMS moneylaundering.com. “The information becomes available through newspaper reports so we take a business as usual approach and do an adverse media search.”

Regulators increasingly view investigative journalism as an “independent and reliable” source of information in the context of financial crime, and expect banks to at least cross-reference data from leaked documents against the names of their clients, the compliance officer said.

Graham Barrow, a London-based anti-money laundering consultant who ran internal investigations at a global investment bank, said “sensible banks” will “immediately” try to spot any connections to the Troika Laundromat, including through former clients.

“If you do identify a link, you want to look at the KYC [know-your-customer] data, the nature and purpose of the account,” Barrow told moneylaundering.com. “You’re also going to be thinking about filing a SAR [suspicious activity report], and may consider exiting the client.”

Barrow said that other banks may go a step further by determining whether any of their legal-entity clients’ names nearly match those of the shell companies allegedly used in the scheme. Similarities in corporate nomenclature often indicate suspicious activity, he said.

The revelations, which follow the Panama Papers, Paradise Papers and other leaks of incorporation and banking data, also increase the pressure on European authorities to crack down on financial institutions that fail to spot and report potentially illicit transactions.

Prosecutors in the Netherlands said Wednesday they are examining details linking Dutch banks ING and ABN Amro to the scheme after de Groene Amsterdammer, a local news outlet, reported that those lenders and Rabobank handled hundreds of millions of euros in suspicious payments.

Lithuanian police are investigating Ukio Bankas, a now-defunct private lender that played a central role in the Troika Laundromat, an official said. A Swiss Financial Market Supervisory Authority spokesperson declined to comment on Credit Agricole Suisse’s apparent involvement.

An East Coast-based compliance officer for a regional bank with global clients told moneylaundering.com that this and other scandals may lead firms to reconsider their prior assessments of certain EU nations as low risk.

Some may require prospective correspondent clients from those nations to disclose more about their nonresident customers and the nations they serve, he said.

“When you’re assessing a client for country risk, the risk isn’t necessarily their own, it’s who they do business with,” he said. “I could be a perfectly viable Nordic bank but if all my clients are Russian, I should be affording that risk to Russia.”

Disparate data

According to the OCCRP, Troika Dialog used Ukio Bankas as a pitstop for funneling cash from fraud, corrupt business deals and other crimes out of the country from 2006 to 2013.

The scheme saw funds move between shell-company accounts at Troika Dialog and Ukio, then bounce between other shell-company accounts inside and outside the Lithuanian lender to cut the audit trail.

Ukio held accounts for at least 35 shell companies formed in the United Kingdom, British Virgin Islands, Panama and elsewhere by Troika to enable the scheme, according to the OCCRP.

Both banks reportedly used nominee directors with no discernible ties to the companies or the funds that flowed through their accounts, and frequently disguised the transactions as trade-related payments.

Troika was bought in 2012 by Sberbank, a Russian lender majority-owned by Russia’s central bank. The Bank of Lithuania, the Baltic nation’s central bank, shut down Ukio in February 2013 after declaring the lender insolvent amid concerns over its compliance controls.

By that point the pair had not only laundered billions of dollars in illicit funds for Russian elites and criminals, but also enabled those groups to hide behind the corporate veil and acquire shares in state-owned companies in secret, buy high-end real estate and other luxury goods in Russia, the United Kingdom and elsewhere, and make charitable donations abroad.

Exposure of the Troika Laundromat follows previous reports by the OCCRP and other news outlets, including Russian daily Novaya Gazeta, on parallel, sometimes overlapping “laundromats.”

All show how crooks and corrupt officials, often from former Soviet states, leverage correspondent accounts, shell firms and lax anti-money laundering policies to stash funds in European banks.

In February 2017, the consortium used leaked transactional records to map out the Russian Laundromat, a network of hundreds of shell firms and 112 bank accounts in dozens of countries used to move almost $21 billion from embezzlement and other crimes out of Russia.

Aided by a list of 5,000 entities connected to the scheme, several European banks, including Deutsche Bank, responded with internal investigations.

The German lender disclosed in a report to the U.K. Parliament in May 2018 that its investigation had unearthed links to 113 questionable entities by that time, resulting in the filing of 156 suspicious activity reports on £63 million of transactions.

Deutsche Bank said it did not identify any suspicious entities among its own clients, but concluded that the shell firms held accounts with correspondent banks whose funds passed through the lender’s branch in London.

But, unlike the Russian Laundromat, the OCCRP has not made the raw data behind the Troika Laundromat publicly accessible, complicating retrospective due-diligence efforts.

“We don’t know from which banks funds come, and there is no list of companies, so it’s not very concrete,” the compliance officer for the European lender said.

Tip of the iceberg?

The leaks, which originated from multiple sources and together represent one of the largest unsanctioned releases of corporate and banking data ever, illustrate the flow of $470 billion across 1.3 million transactions involving 233,000 companies.

Only a fraction of the data provided the basis for the Troika Laundromat expose, suggesting more revelations in the near future.

“Troika won’t be the end of the matter,” said Barrow, the London-based consultant. “We’re talking about €400 billion … every bank in Europe will have seen some of that money and they’ll all be pretty nervous.”

High-profile cases against Danske Bank, Malta’s Pilatus Bank, Latvia’s ABLV Bank, ING in the Netherlands and other financial institutions last year led European officials to put forward proposals to harmonize anti-money laundering supervision throughout the European Union, and spurred calls for a bloc-wide AML enforcer.

On Feb. 27, the European Parliament’s special committee on financial crime called for the creation of a bloc-wide financial police force that would operate within Europol and focus on sophisticated cross-border crimes.

The latest data leak once again exposes how the “structural weaknesses” of the European Union’s financial system allows money launderers to exploit lax supervision on the bloc’s eastern and southern fringes, George Voloshin, head of Aperio Intelligence’s branch in Paris, said.

“The combination of corporate secrecy and poorly enforced standards at banks that are entirely embedded in the western banking system is the problem today,” Voloshin said. “I’m more than sure that laundromats in one form or another are still operating quite extensively.”

Contact Daniel Bethencourt at dbethencourt@acams.org; Gabriel Vedrenne at gvedrenne@acams.org; and Koos Couvée at kcouvee@acams.org